Government-owned explorer ONGC is finding itself in a tough spot as it has realised that a part of its offshore block — KGN-DWN-98/2  —in the KG basin is no longer fit for carrying out exploration activities due to the extraction of gas from it by Reliance Industries.

US-based international consultant DeGolyer and MacNaughton (D&M) in its preliminary report has found that nearly 9 billion cubic metres (bcm) of gas has flown out of ONGC’s block to RIL, which holds the adjacent block – KG-DWN-98/3, commonly known as KG-D6.

Simply put, the block held by ONGC is divided into two parts – northern and southern discovery areas. The northern area is further bifurcated into cluster I and II. Now, consultant D&M has found existence of a contiguous reservoir covering RIL’s KG-D6, cluster I and another nominated area Godavari of ONGC. According to the draft finding submitted for comments, of the total 58.68 bcm gas drilled by RIL from its block, 8.981 bcm actually belonged to ONGC.

“It is a fact that cluster-I cannot be developed any further, as gas has already been taken out. So, ONGC has dropped the plan to develop cluster-I. The other two clusters would be developed, starting first with cluster-II,” officials working on the project told FE.

The D&M finding also brings to light the fact that nearly 12.71 bcm of gas from the ONGC block may flow towards the RIL block till 2019. Of this, about 11 bcm could be commercially produced.

On August 13, ONGC had said it would spent about $6-7 billion to take out hydrocarbon from one of its much-touted block – KG-DWN-98/2 – off the Andhra Pradesh coast.

The first gas production from the deepwater block is expected in 2018, while crude oil output is envisaged in 2019. The peak output is pegged at 77,000 barrels per day (bpd) of crude oil and nearly 16-17 million metric standard cubic metres per day (mmscmd) of natural gas.

Meanwhile, sources told FE the petroleum ministry is looking to play the role of an umpire to amicably solve the issue between the two companies after D&M submits the final report by November-end.

“The ministry would carefully examine the report and follow the rule book. There is no question of favouring any firm. The issue must be resolved within a certain time frame without getting into a legal battle or arbitration,” a senior official at the ministry told FE.

It is believed that petroleum minister Dharmendra Pradhan is keeping himself updated on the issue.